For Immediate Release
April 5, 2006
Fact Sheet: Health Savings Accounts: Affordable and Accessible Health Care
Today's Presidential Action
Today, President Bush Discussed His Agenda To Make Health Care More
Affordable And Accessible By Expanding Health Savings Accounts (HSAs).
The President discussed how HSAs are giving Americans more control over
their health care costs and decisions and are helping businesses make
health care more affordable and accessible for employees.
Health Savings Accounts: The Basics
What Are HSAs? Established by the Medicare reform bill President Bush
signed into law in December 2003, HSAs allow Americans to save tax-free
dollars to pay for near-term medical expenses and save for future
longer-term costs. Accounts are accompanied by an HSA-qualified
insurance plan covering major medical expenses and preventive care.
HSA-qualified insurance plans are an alternative to traditional health
insurance policies and have lower premiums and higher deductibles.
Savings from lower premiums can be put toward funding the HSA.
- Who Is Eligible For HSAs? To be eligible for HSAs, individuals must be
covered by an HSA-qualified insurance policy. Americans with government
health benefits, for example Medicare and Medicaid, are generally
- How Do People Sign Up For HSAs? People with HSA-qualified plans can
open up their account with banks, credit unions, insurance companies,
and other approved companies. Employers may also set up plans for
employees. More information is available on the Treasury Department
website at http://www.treas.gov/offices/public-affairs/hsa/faq.shtml.
- What Are HSA-Qualified Insurance Policies? HSA-qualified insurance
policies are more affordable insurance plans that protect individuals
and families in the event of major medical illness. These plans
generally provide the same benefits as traditional insurance policies,
including prescription drug coverage, doctor's visits, emergency room
visits, and hospitalization. However, they require that a higher
deductible be met before benefits are paid. The higher deductible
allows the insurance company to charge significantly lower premiums.
- How Much Can Be Contributed To An HSA Annually? For 2006, Americans can
contribute up to $2,700 per year for individual coverage or up to $5,450
per year for a family. However, annual contributions cannot exceed the
deductible of the HSA-compatible insurance policy. For example, if the
deductible is $1,100, not more than $1,100 can be contributed that year.
Both individuals and employers can contribute to HSAs. Money unspent
one year rolls over into the next year. Americans age 55 or older (and
not yet enrolled in Medicare) can make additional "catch-up"
contributions of up to $700 per person this year, which can provide
extra help to many early retirees.
HSAs Provide Americans With More Control Over Health Care Costs.
Americans own and control the money in their HSA. They decide how to
spend the money in their account on their own health care needs, and
they keep what they do not spend. HSAs can make health insurance more
affordable and help businesses lower health care costs.
- Increased Patient Control Over Health Care Spending Can Result In Better
Value For The Patient. For example, overall health care costs have
risen, but competition and consumer choice have lowered the cost of
laser eye surgery (LASIK) - a procedure not covered by most insurance
plans. The consumer marketplace led the price of this surgery to fall
by almost half, and procedures increased 10-fold from 1998 to 2002.
Health Savings Accounts: Expanding Health Care Coverage And Lowering
More Americans Are Signing Up For HSAs. The number of Americans with
HSAs has tripled from one million in March 2005 to the more than three
million reported in January 2006. The number of Americans with HSAs is
currently projected to increase to 29 million by 2010.
Low- And Moderate-Income Americans And Those Previously Uninsured Are
Enrolling In HSAs. More than one-third of HSA purchasers last year had
incomes under $50,000 per year, and one-third of individual HSA
purchasers last year were previously uninsured.
HSAs Are Helping Small Businesses Provide Health Insurance. The latest
survey data indicate one-third of small businesses offering HSAs
previously did not offer insurance to employees.
Building On This Success, The President Proposes To Expand HSAs By:
Giving Individuals Who Independently Purchase HSAs The Same Tax
Advantages As Those With Employer-Sponsored Insurance. The President
proposes making premiums for HSA-compatible insurance policies tax-free
when purchased directly by individuals instead of through their
employers. An income tax credit would offset payroll taxes paid on
premiums for HSA policies - especially helping the self-employed,
unemployed, and workers for companies that do not offer insurance.
Americans who are not working, especially early retirees, could pay
premiums for the purchase of non-group HSA plans tax-free from an HSA
Eliminating All Taxes On Out-Of-Pocket Spending Through HSAs. The
President proposes allowing Americans with HSAs and their employers to
make annual HSA contributions to cover all out-of-pocket costs tax-free
under their HSA policy, not just the deductible as provided under
Extending The Benefits Of HSAs To Low-Income Families And Individuals
Through Refundable Tax Credits. A family of four making $25,000 per
year or less will be able to receive a refundable tax credit of $3,000
from the Federal government to help purchase an HSA-compatible policy.
These families can put up to $1,000 of that money directly into an HSA
to cover routine medical expenses.
Enabling Portable HSA Insurance Policies. Employers would have the
ability to offer workers a portable HSA-qualified insurance policy that
employees could keep after changing jobs. Premiums would be tax-free
and would not increase based on employees' health status upon changing
jobs, leaving the labor force, or moving.
Allowing Employers To Make Higher Contributions To The HSAs Of
Chronically Ill Employees. Under current law, employers must contribute
the same amount to each employee's HSA. This prevents employers from
providing extra help to chronically ill employees to pay for their
higher-than-average out-of-pocket expenses. Permitting employers to
make higher contributions will help chronically ill employees fund their
HSAs and pay their out-of-pocket expenses tax-free through their
The President's Agenda To Make Health Care More Affordable And
Accessible To All Americans
Passing Association Health Plans (AHPs) To Give Small Businesses The
Same Benefits As Big Businesses And The Ability To Expand Employee
Coverage. AHPs let small businesses join together across state lines to
purchase health insurance, giving them the same advantages,
administrative efficiencies, and negotiating clout enjoyed by big
companies and labor unions. By purchasing coverage for thousands of
employees at a time, association members can pay lower premiums for
better coverage. The President has called on Congress to allow small
businesses to form AHPs.
Enhancing The Medical Liability System's Fairness And Predictability
While Reducing Wasteful Costs. Frivolous lawsuits and excessive jury
awards limit access to health care by driving providers out of many
communities. They also increase costs by forcing doctors to practice
defensive medicine. Lawsuits are driving many good doctors out of
practice - leaving women in nearly 1,500 American counties without a
single OB-GYN . The President calls on Congress to pass medical
liability reforms securing an injured patient's ability to get quicker
compensation for economic losses while reducing frivolous lawsuits.
Improving Health Information Technology (IT). The Administration is
working to expand the use of health IT to lower costs, reduce medical
errors, and improve quality of care. In 2004, the President launched an
initiative to make electronic health records available to most Americans
within the next 10 years.
Increasing Transparency In The Health Care System. Americans should be
able to easily obtain understandable information about the price and
quality of health care. The President urges medical providers and
insurance companies to make information about prices and quality readily
available to all Americans prior to treatment.
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